Article 24 · Shipping
Why ship fuel still costs over 70% more than before the war
Bunker fuel, the oil that powers cargo ships, is still priced far above its level before the war on Iran. Shipowners now buy it in smaller lots at more ports.
What bunker fuel is
Bunker fuel is the oil that powers cargo ships. Shipowners buy it at hubs such as Singapore, Rotterdam and Fujairah in the United Arab Emirates, and it is one of the largest running costs of a ship.
More than seven months after the war on Iran began, marine fuel prices remain well over 70% above pre-war levels, according to bunker trader data cited by Reuters on October 16th. The war is being fought by the United States and Israel, and Iran sits on the Strait of Hormuz, the narrow sea lane that much of the Gulf's oil leaves through.
Why the price stays high
Supply is short. Kieran Gallagher, head of Asia at the oil trader Vitol, said on October 16th that flows of high-sulphur fuel oil through Hormuz are down at least 800,000 metric tons a month from February. Kpler data shows exports through the strait averaged about 3.7 million tons a month from January 2025 to February 2026.
Russia adds to the gap. Gallagher said attacks on Russian refineries have cost an estimated 1 million tons of fuel oil a month on top of the Gulf loss.
Buyers pay for it. The spot premium for 380-cst high-sulphur fuel oil hovered near $50 a ton in the week of October 16th, against $5.10 on February 27th, according to LSEG data. In Singapore, the world's largest bunkering center, low-sulphur fuel (VLSFO) rose from $433.50 a ton on January 1st to $878.50 on September 11th, as Figure 1 shows.
Singapore low-sulphur ship fuel, dollars per metric ton
How shipowners changed their buying
The shortage of March and April has eased. Industry executives told FreightWaves that operators no longer struggle to find fuel at major hubs. The problem is now price and uncertainty.
Owners have responded by buying less at a time. Peter Grunwaldt, head of bunkering at the tanker company Hafnia, told Reuters that owners buy the minimum needed to reach the next port when the market jumps. Choong Zhen Mao of Singapore's Equatorial Marine Fuel said term contracts have shortened to a quarter or even a month, from six months or a year before the war.
They also buy in more places. Fujairah was a top supplier, but fighting nearby has pushed owners to Port Louis in Mauritius, Colombo in Sri Lanka and Salalah in Oman. Bunkering at Fujairah has recovered to about 40% of its pre-war level, FreightWaves reports. Vitol began selling fuel at Gwadar Port in Pakistan in July, outside the Strait of Hormuz.
Who pays
Shipping lines try to pass fuel costs on. On contract business they use bunker adjustment factors or emergency fuel surcharges. On spot trades the outcome depends on ship supply, demand and port congestion, so the pass-through differs by route.
The St. Louis Fed estimated that the early 2026 fuel shock raised the fuel cost of a China to US West Coast voyage from $155 to $269 per 20-foot container on a newer ship. On an older ship the figure went from $360 to $626.
The extra cost reaches importers and exporters through freight rates, which makes landed costs harder to predict.
What could change
Gallagher warned that attacks on shipping and oil infrastructure threaten supplies that the market now assumes will arrive.
The analyst Ship & Bunker raised its forecast for the fourth-quarter average of a 20-port VLSFO benchmark to $758 a ton, from $646. That is its view, and it can move with the war.